SAP Could Hold Key to App Battle

Updated from 2:37 p.m. EDT

Rumors that Microsoft(MSFT Quote) is planning to buy SAP(SAP Quote) may be wide of the mark, but the German software giant is still seen as a key player in a turbulent tech landscape.

Microsoft CEO Steve Ballmer dismissed recent speculation about a SAP purchase as "random rumor" on Tuesday, according to media reports. Ballmer poured water on the rumor just a day after Microsoft sold a $3.75 billion debt issue, which had added fuel to the M&A chatter.

With the tech sector in a state of flux, however, there is a great deal of interest in which firms will be next on the block. Oracle's(ORCL Quote) recent acquisition of Sun Microsystems(JAVA Quote), for example, was a surprise move that sent shockwaves though the software sector.

By adding its database software to Sun's Java, Solaris, MySQL and server technology, Oracle could pose a serious challenge, not just to SAP, but also to some of its key competitors.

"Our view is that the Oracle-Sun deal may be a net negative for both IBM and SAP," wrote Patrick Walravens, an analyst at JMP Securities, in a recent note. "For SAP, it is losing more and more of the [application software] stack."

The analyst explained the some SAP installations will now sit on a Sun server running the Solaris operating system and an Oracle database, meaning that Sun/Oracle owns a significant chunk of the software market.

IBM(IBM Quote), which had attempted to buy Sun before Oracle stepped in, could even fix its sights on SAP, according to Walravens.